Net widens on double-dip pensioners

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An already unpopular scheme to cut Kiwi pensions is being expanded, with the retired being pushed to hit up other countries for money first.

Faced with a growing elderly population, the Ministry of Social Development is targeting tens of thousands of newly retired people, urging them to apply for overseas state pensions - and save the Government millions.

The scheme is meant to prevent double-dipping, with $1 docked from New Zealand Super for every $1 received from overseas. The deductions apply even to a spouse of someone who receives an overseas pension.

The ministry will spend an extra $12 million over the next five years on the expanded pension-deduction plan, which it estimates will save the Government at least $49m and help pay for its $300m welfare shake-up.

The longstanding scheme, which dates back to 1938, already docks Super payments of about 65,000 people receiving overseas state pensions, saving the Government about $237m a year. Most are from the eight countries with which New Zealand has a social security agreement, including Britain, Australia, Canada and Ireland.

But the scheme is unpopular, and Associate Professor Susan St John, of Auckland University's retirement policy and research centre, has described it as "archaic" and "deeply inequitable".

Budget documents published last week show the scheme will now be expanded, partly because it is seen as an easy way to free up money to fund welfare reform.

"Easy options of saving have been largely exhausted," the papers say. "Unlike many other potential saving initiatives, the overseas pension collection initiative is available under current policy settings."

Social Development Minister Paula Bennett has been overseas holding talks about extending pension portability schemes. She signed an agreement with Malta on Monday, and said she had also talked to her counterpart in Croatia.

She could not be reached for comment yesterday, but the papers show the extra money for the ministry will be spent on 29 more staff to help people living in New Zealand apply for overseas pensions, and on a new IT system that will test an extra 10,000 new superannuitants a year.

Ministry senior services general manager Arthur Grooby said that, as the baby-boomers reached 65, the drain on New Zealand Super would rise. More money was needed to fairly test the entitlement of thousands of new superannuitants and ensure they were claiming any money they could from overseas schemes.

That was a legal requirement, he said. "Applying entitlement testing for new superannuitants ensures equity with current superannuitants . . . the proposal will not affect those already tested."

However, the Government knows the scheme is contentious. In another briefing, the deductions were described as "unpopular" and it was predicted the expansion would probably lead to greater "public scrutiny and debate".

Michael Littlewood, also of Auckland University's retirement policy and research centre, said pouring more money into the flawed scheme would only increase "disquiet". "There is going to be a whole new bunch of people aggrieved."

The scheme left some with generous support and others unfairly disadvantaged. Immigrants without pensions from their country of origin would be eligible for New Zealand Super within 10 years, while people who had worked in New Zealand most of their lives could have their payments cut after marrying foreigners with generous pension schemes.

SUPER SUFFERS BECAUSE OF MARRIAGE

Vivien Engler has worked in New Zealand most of her life but can get only a fraction of the pension offered to many more recent arrivals.

The 67-year-old Aucklander was born and raised in New Zealand and has spent most of her adult life paying taxes here. She is not entitled to a pension overseas.

However, because she chose to marry an American with a decent United States pension, her New Zealander Super payments have been dramatically cut. For every dollar he receives from the US each fortnight - above and beyond what would be his NZ Super payment - she loses a dollar. That cuts her payments to less than $100 a week, fluctuating every fortnight with the strength of the American dollar.

Mrs Engler has continued to work four days a week to supplement their income.

She tried to fight the decision without success, and has now given up receiving NZ Super payments altogether, opting for a more modest allowance extended to American pensioners' spouses. "But I feel bad about the US paying for me - I'm not an American."

NZ SUPER

Anyone who is a New Zealand resident and has been living here for at least 10 years is entitled to state superannuation when they turn 65.

More than 570,000 people received $9.5 billion in New Zealand Super last year with the number expected to continue to grow as the population ages.

The payments can be as much as $357.42 a week, with couples paid less.

Of these, about 65,000 people have their payment cut because they receive money from an overseas scheme. Reducing these payments saves the Government about $232 million a year.